Case of the Day: Princeton Digital Image v. Konami Digital Entertainment

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The case of the day is Princeton Digital Image Corp. v. Konami Digital Entertainment Inc. (D. Del. 2016). The case was a patent infringement action against Konami, the developer of the Dance Dance Revolution video game . Princeton sought an order requiring Konami, the US subsidiary of Konami Holdings Corp., to produce documents in the possession of its sister subsidiary, Konami Japan, on the theory that the documents were within the US subsidiary’s control. (The ordinary test for what is discoverable, under FRCP 34, is that the documents must be in the responding party’s “possession, custody, or control”).

The Third Circuit applies the Gerling test to the issue of control in sister-company cases. There are two tests under Gerling: either the company in possession of the documents must be the alter ego of the company from which discovery is sought; or “the litigating corporation had acted with its sister in effecting the transaction giving rise to suit and is litigating on its behalf.”

The court denied the motion. It refused to make assumptions not warranted by the record about the relationship between the sister entities. It credited a Konami affidavit that emphasized the corporate separateness of the entities, and it did not attach much weight to the fact that Konami (US) had once asked for and received documents relevant to the litigation from the Japanese sister. The court held open the possibility that Princeton might be able to make the necessary showing if it could develop evidence about the relationship between the entities, and it noted that Princeton could have, but had not, sought the documents via a request under the Hague Evidence Convention.

The decision seems correct on the facts, particularly given how the Third Circuit phrased the test in Gerling. Of course, things are easier if a parent company is a party. A parent has control of documents in possession of a subsidiary in a way that a sibling company may not.

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